According to the December 2006 self-assessment by the Swedish accounting and auditing authority (FAR SRS), Sweden adopts International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Board (IAASB) as the Swedish Standards on Auditing (SSAs), although with modifications to reflect local legal requirements. No further information on the extent of compliance of SSAs with ISAs is publicly available. On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force, requiring all statutory audits of annual and consolidated accounts to be carried out on the basis of ISAs as adopted by the European Commission. Accordingly, European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

General Overview

The legal framework for auditing practices in Sweden is primarily laid out in the Companies Act of 1975 (replaced by the Companies Act of 2005), the Auditor's Act of 2001, the Auditing Act of 1999, the Annual Accounts Act, and the Bookkeeping Act. As pointed out in a 2004 paper by Fredriksson and Johansson , the Swedish Companies Act lays down detailed regulations concerning limited companies, including regulations on auditing and the functions of the auditor. The Auditor's Act spells out the difference between an approved and authorized auditor and in what form their business can be practiced. Further, this Act explains the auditor's obligations with regard to "where the GAAP comes first followed by the regulations that will guarantee the auditor's independence" (p. 13). The Auditor's Act also clarifies what information the auditors need to disclose to the Supervisory Board of Public Accountants (Revisorsnämnden, or RN), and the disciplinary actions that can be initiated in cases of non-compliance with the legal requirements. The Auditing Act sets forth the general framework and, among its requirements, mandates that all companies must have at least one auditor and clarifies the qualifications of the auditor.

The securities market, including banks and insurance companies, is regulated by the Swedish Financial Supervisory Board (Finansinspektionen, or FI). The FI is a governmental agency that regulates and supervises reporting and disclosure requirements of the financial sector. The regulatory oversight of the accounting profession is performed by the RN, a governmental body which, according to the 2005 FAR SRS self-assessment, "ensures that the development of professional ethics and professional audit standards is satisfactory and adequate." The RN accomplishes this by issuing regulations concerning the activities of public accountants and public accounting firms. Further, the self-assessment noted that "professional ethics and standards can also be subject to the board's interpretation in individual disciplinary cases." The two main professional bodies -- Swedish Organization of Certified Public Accountants (Foreningen for Auktoriserade Revisorer, or FAR) and the Swedish Organization of Auditors (Svenska Revisorsamfundet, or SRS) -- merged effective September 1, 2006, to form the FAR SRS. The FAR SRS is a professional institute for public accountants and plays a leading role in the development of professional standards, education and information for the audit profession in Sweden. According to the 2006 FAR SRS self-assessment, ethics requirements are covered under the Auditors Act and the FAR SRS has adopted the revised International Federation of Accountants (IFAC) Code of Ethics effective since June 30, 2006 without any modifications. The FAR SRS is listed as a member on the IFAC website.

As explained in the 2006 FAR SRS self-assessment, the merged organization adopts the International Standards on Auditing (ISAs) with amendments to reflect local legal requirements as the Swedish Standards on Auditing (SSAs). No information on the extent of compliance of SSAs with ISAs is publicly available. However, in line with the May 2006, Directive 2006/43/EC of the European Parliament and the European Council (EC), statutory audits of annual and consolidated accounts are required to be performed on the basis of ISAs as adopted by the EC. European Union (EU) member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

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ISA 210 Terms of Audit Engagements (effective 2006)

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ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

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ISA 230R Documentation (effective 2006)

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ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

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ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

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ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

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ISA 300 Planning an Audit of Financial Statements (effective 2004)

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ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

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ISA 320 Audit Materiality (effective 2004)

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ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

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ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

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ISA 500 Audit Evidence (effective 2004)

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ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

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ISA 505 External Confirmations (effective 2004)

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ISA 510 Initial Engagements — Opening Balances (effective 2004)

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ISA 520 Analytical Procedures (effective 2004)

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ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

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ISA 540 Audit of Accounting Estimates (effective 2004)

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ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

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ISA 550 Related Parties (effective 2004)

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ISA 560 Subsequent Events (effective 2006)

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ISA 570 Going Concern (effective 2004)

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ISA 580 Management Representations (effective 2004)

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ISA 600 Using the Work of Another Auditor (effective)

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ISA 610 Considering the Work of Internal Auditing (effective 2004)

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ISA 620 Using the Work of an Expert (effective 2005)

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ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

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ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

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ISA 710 Comparatives (effective 2004)

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ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

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ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

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